Saturday

21st Oct 2017

Eurozone bank needs more scrutiny, says NGO

  • "Open doors" at the ECB headquarter in Frankfurt in October 2016. (Photo: ECB/Flickr)

The European Central Bank (ECB) should leave the "troika" of lenders to EU countries and be put under increased scrutiny, according to Transparency International (TI).

In a report published on Tuesday (28 March), the NGO said that the eurozone's central bank enjoys an "extraordinary degree of latitude", which keeps it out of "appropriate democratic scrutiny".

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • ECB chief Draghi (r) and his predecessor Tricher (l). "No other central bank in the world holds that power," says TI's report. (Photo: commission.europa.eu)

"No other central bank in the world holds that power," the report says, referring to the ECB's critical role in the financial crisis, which was necessary to maintain the unity of the euro area.

"No decision by the US Fed could result in the ejection of a state from the Union," it says, comparing the ECB to the US Federal Reserve.

The ECB, under its two presidents, Jean-Claude Trichet and Mario Draghi, took decisions that were described as technical but were highly political and went beyond its mandate, according to Transparency International.

In 2010 and 2011, the ECB sent letters to the Irish, Spanish and Italian governments, making its financial support conditional to structural reforms or budgetary cuts. The letters were not public at the time, but were either leaked or published later.

"The ECB held the key to keeping member states within the euro that may otherwise have faced a disorderly exit," the report notes.

In February 2015, after radical left politician Alexis Tsipras came to power in Greece, the ECB said it would not accept Greek bonds as collateral for loans from Greek banks.

And in July 2015, after Tsipras called a referendum on the bailout terms, the ECB refused to increase the level of emergency liquidity assistance (ELA) to Greek banks - a decision that led the Greek government to impose capital controls.

"The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors," which includes the European Commission and the International Monetary Fund, says Transparency International.

Saving the euro

TI recognises that decisions by the ECB were crucial in a time of crisis, noting that it has done "more than any other actor to save the financial and economic system of the euro area from collapse."

But it insists that "the ECB needs democratic oversight if the euro is to survive the next crisis," and should leave the troika.

"The ECB should no longer play a substantive role in the Troika and should have no formal role in the negotiation and monitoring of the conditions for receiving bailout funds," it says.

The ECB is already under oversight through the so-called "monetary dialogue", a regular hearing organised with the European Parliament. But this is "not exactly a ‘grilling’ of the ECB’s leadership," regrets TI, calling to change the rules on the ECB's independence and accountability.

TI proposes the creation of an "agreement" with the European Parliament and the Eurogroup, the body of eurozone finance ministers, to set the rules for decisions "that go beyond its mandate but could help avert or contain a crisis" - such as limiting its direct support of a country or making it conditional on structural reforms.

Other measures include giving the EU parliament the power to confirm the appointment of members of the bank's executive board.

The NGO also says that the ECB should publish its decisions and opinions, join the EU lobbying transparency register, and oblige members of its governing council to publish public declarations of interest.

And, because "many executive board members" have taken up job posts in private finance after their mandate ended, it calls for a 2-year "cooling-off period".

"Some recommendations of the report fall outside the ECB’s mandate or were not foreseen in the Treaty," reacted the ECB in a statement on Tuesday.

Benoit Coeure, a member of the executive board, said on Tuesday that the ECB was already "accountable for its policies", referring to the hearings at the EU parliament.

At a seminar organised by TI on Tuesday about its report, Coeure praised the transparency policy of the institution, referring to the publication of the accounts of its governing council meeting, and of the diaries of its executive board members.

He defended the way the ECB acted during the Greek crisis, saying that the conditions for collaterals and ELA were "transparent and equal for all counter-parties in the euro area".

Speaking to EUobserver, several EU officials who followed the Greek negotiations in 2015 said that the ECB always operated in a clear legal environment.

"The situation was different in 2010," said one official. "Back then, the ECB was more directly involved in the negotiation of the measures."

Strangling the Greek economy

Since the 2012 creation of the European Stability Mechanism (ESM), the eurozone emergency fund, the ECB mostly provides a support role in the development of stability programmes.

A diplomatic source said that the ECB's decisions to limit liquidity to Greek banks in 2015 were "justified" and "well-argued" at the time.

"If there were a problem, there would have been a formal complaint at the Court of Justice – and I did not see that happening," the source said.

A former Greek official, with knowledge of the bailout talks in 2015, said that the responsibility of the ECB in the Greek crisis was nothing new.

"There is already plenty written on this topic," he said. "The ECB is the one who strangled the Greek economy."

Varoufakis back in push for ECB transparency

The former Greek finance minister Yanis Varoufakis and German left-wing MEP Fabio De Masi want to know whether the European Central Bank overstepped its powers when putting capital controls on Greek banks in 2015.

EU countries praise Tusk's new summit plans

EU capitals voice support for more summits, tackling divisive issues and sometimes deciding by majority - not consensus - as outlined in the European Council president's plan.

EU agencies defend research ahead of glyphosate vote

As the renewal of the weedkiller glyphosate is a hot potato on the EU agenda, with a vote in the Parliament on Thursday, the role of two closely-involved EU agencies has come under scrutiny.

Europeans more positive about EU, survey shows

On balance, 55 percent of British respondents said the UK had benefited from EU membership. Among all European respondents, 47 percent said their voice counted in the EU.

News in Brief

  1. Rajoy to trigger Article 155 on Saturday in Catalan crisis
  2. EU conducts unannounced inspection of German car firm
  3. Lithuania calls for new EU energy laws
  4. EU leaders aim for December for defence cooperation
  5. Juncker says hands tied on Russia pipeline
  6. Czechs set to elect billionaire Andrej Babis
  7. Italian regions hold referendums on more autonomy
  8. EU leaders refuse to mediate Catalonia conflict

Stakeholders' Highlights

  1. European Friends of ArmeniaEU Engagement Could Contribute to Lasting Peace in Nagorno-Karabakh
  2. UNICEFViolence in Myanmar Driving up to 12,000 Rohingya Refugee Children Into Bangladesh Every Week
  3. European Jewish CongressEJC Applauds the Bulgarian Government for Adopting the Working Definition of Antisemitism
  4. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  5. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  6. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  7. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  8. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  9. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  10. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  11. CECEE-Privacy Regulation – Hands off M2M Communication!
  12. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People

Latest News

  1. The mysterious German behind Orban's Russian deals
  2. Mogherini urged to do more on Russian propaganda
  3. Turkey funding cuts signal EU mood shift
  4. Posted workers top EU agenda This Week
  5. Leaders lobby to host EU agencies at summit's margins
  6. Legal tweak could extend EU control on Russia pipeline
  7. Ukraine language law does not harm minorities
  8. EU begins preparations for Brexit trade talks

Stakeholders' Highlights

  1. EU2017EEEHealth: A Tool for More Equal Health
  2. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness
  3. CECENon-Harmonised Homologation of Mobile Machinery Costs € 90 Million per Year
  4. ILGA-EuropeMass Detention of Azeri LGBTI People - the LGBTI Community Urgently Needs Your Support
  5. European Free AllianceCatalans Have Won the Right to Have an Independent State
  6. ECR GroupBrexit: Delaying the Start of Negotiations Is Not a Solution
  7. EU2017EEPM Ratas in Poland: "We Enjoy the Fruits of European Cooperation Thanks to Solidarity"
  8. Mission of China to the EUChina and UK Discuss Deepening of Global Comprehensive Strategic Partnership
  9. European Healthy Lifestyle AllianceEHLA Joins Commissioners Navracsics, Andriukaitis and Hogan at EU Week of Sport
  10. Nordic Council of MinistersNordic Council Representative Office Opens in Brussels to Foster Better Cooperation
  11. UNICEFSocial Protection in the Contexts of Fragility & Forced Displacement
  12. Nordic Council of MinistersNordic Innovation House Opens in New York to Support Start-Ups